Customers eyeing to buy cars are now heading towards the public sector banks to get them financed. Earlier the private lenders use to lead in disbursing the auto loans but now the situation has reversed. PSU banks are clearing loans in just 2 to 3 days alike the private lenders.

The public sector banks have reported a hike in the sanction of auto loans as compared to their previous level and have even outpaced the private sector banks. The major reason for this jump is attributed to the lower interest rate offered by the public banks against the private lenders.

Following the global meltdown, private sector banks have become strict in extending the auto loans and the public lenders have taken this to be a great opportunity for scaling up their business. Above these lenders are also clearing the loan as fast as they can.

Mr Wilfred Minz, a supervisor at Life Insurance Corporation was exploring the market to get his Alto financed and he finalized on State Bank of Patiala to make the deal as it was offering him the loan at 12.25%. On the other hand the private lenders were charging from 13% to as high as 18% to 19%. Above all the loan was sanctioned without any delay. "My experience has been that despite the extensive documentation they need (public sector banks), I did not have to run around and my loan got sanctioned in just two days," said Mr Minz.

Mr Ramesh Khanna, a marketing manager, who got his Ford Ikon financed through State Bank of India, is impressed with the bank's speedy service. "It was hassle-free. I could not believe that a SBI official would come even at 9 p.m. to verify my documents," he said.

"Earlier public sector banks were taking a week or longer to grant auto loans and private banks were doing it in two-three days. Now it is the other way around. In the earlier days private sector banks were not so stringent in lending. Even without Form 16, if the customers had two years in a stable job, the loan got sanctioned. Public sector banks have more checks. Despite this, they are now at par, or even quicker in lending," said a dealer with Maruti Suzuki, a leading automaker.

As the private lenders are slowing down on their business, even the car makers in the country are holding tie- ups with the public sector banks to get their vehicles financed. Mr Mayank Pareek, Executive Officer, Marketing and Sales, Maruti Suzuki India Ltd said, "Public sector banks are lending in such difficult times. Though this can help sustain business, for growth to happen there has to be more lending."

Banking sources claim that ICICI Bank's share in financing Maruti cars has declined to about 1,100 cars a month in this time of slowdown from the 11,000 cars earlier. Conversely SBI has started financing 14,000 units of Maruti cars a month as compared to around 8,000 earlier.

State Bank of India has also become the second largest financier of Hyundai cars. Senior Vice-President, Sales and Marketing, Hyundai India, Mr Arvind Saxena says, "The share of public sector banks in financing Hyundai cars has been growing despite their stringent lending norms. But there is scope for more aggression."